According to Salary.com, a Licensed Professional Counselor (or ‘Family Counselor’) working in Cambridge, MA makes a median average of $43,144 per year. A Substance Abuse Counselor (or ‘Chemical Dependency Counselor’) makes an average of $57,411.
In a city where the average cost of a 1500 square foot home exceeds a million dollars ($747 per foot, and expected to grow 3.6% this year, according to Zillow), working as a fulltime therapist is financially untenable. And while Cambridge (where I lived when I went into private practice) is expensive, the math isn’t too dissimilar in other cities across the country. For example:
- A 1500 square foot home in Bethesda, MD will run $685,500. Average Counselor Salary: $41,817
- A 1500 square foot home in Denver, CO will run $511,500. Average Counselor Salary: $38,329
- A 1500 square foot home in Austin, TX is a bargain at $310,500. Average Counselor Salary: $37,343
Nobody chooses the profession of counseling for the high pay. But is financial struggle our collective fate? Is the practice of counseling relegated to people who don’t need to make a living, or as a side passion one must pursue separately from a full-time job? I hope not, and I don’t believe so. I’ve found that with hard work and good planning, earning an income of $100,000 per year in private practice is an obtainable goal.
Money in Private Practice
As counselors, we loathe to discuss money–we want to focus on patient care. However, money is a necessary part of keeping the practice doors open. The fact is, you can’t help anyone if you’re out of business, and a counseling practice is precisely that—a business. Hence, in this column we’re going to look at the financial aspects of running a viable counseling business/practice.
Client fees vary depending on the location of your practice, and the payer(s) you work with. For example, in Oregon a masters-level clinician accepting 3rd party insurance payments (for example, a combination of Anthem, United Healthcare, and Cigna) might earn $99 for a diagnostic evaluation (90791). Ongoing appointments for individual or family psychotherapy (90834/90837/90847) might pay around $70.
For now, let’s estimate that all your clients pay for services with insurance, and your average fee for a 45-minute session is $75.
The number of sessions that constitutes a fulltime caseload is hotly debated. Some professionals feel that 30 sessions per week is too heavy of a caseload, while others find that they can comfortably serve 40+ clients per week (I say ‘hotly’ debated because providers who opt for fewer clients have been known to accuse those with heavier caseloads of being unethical.
I find 35 sessions per week to be a sustainable number for a full-time clinician. With this number, if you’re providing 45-minute sessions, that’s 26.25 hours of face-to-face work with clients each week. With schedule gaps and practice management duties, you’re looking at a 45-hour workweek. It’s a full-time job to be sure, but not unendurable. In addition, let’s say that you give yourself a modest 4-week vacation each year.
35 (sessions per week) x 48 (weeks per year) = 1,680 (sessions per year)
1,680 (sessions per year) x $75 (fee per session) = $126,000 (yearly revenue)
Now that revenues are calculated, we need to subtract any/all practice expenses. There are large, small, and hidden costs to running a practice: from patient parking, to coffee, to organic tissues, to printer ink. Below is a sample (broad category) expense list.
- Rent (one office): $550 per month = $6,600 per year
- Office supplies (computer, software, phone, furniture, printer, coffee, etc.) = $3,000 per year
Furniture, if not financed, will be an initial outlay of several thousand dollars.
- Professional dues, CEUs, & liability insurance = $800 per year
This number is often contested as it applies to the costs of professional CEUs. Note that $800 won’t get you to a national conference, but it will cover the basics. There are quality low cost CEU options, one just needs to look.
- Accounting & Legal fees = $500 per year
- Advertising and Marketing = $6300 per year
There’s no ‘correct’ amount to spend on marketing or advertising. In fact, many counselors spend almost nothing. However, for the sake of this exercise, let’s earmark 5 percent of your gross yearly revenue for the marketing and advertising your practice (5% of $126,000 (yearly revenue) = $6,300).
- Medical Billing = $6930 per year
While some counselors prefer to do their own medical billing, you may wish to hire a company to handle it for you. A customary cost is 8 percent of what the billing company collects, which comes out to around 5.5 percent of your gross revenue. Note that it’s 5.5 percent because medical billing companies don’t customarily take a share of client deductibles, or co-pays (5.5% of $126,000 (yearly revenue) = $6,930).
- Other Miscellaneous = $1000 per year
$126,000 (revenue) – $25,310 (expenses) = $100,870 (net)
And there you have it! A 6-figure private practice.
While the above provides a theoretical outline of private practice financials, no counseling practice will perfectly mirror the example. To help you determine with greater accurately your finances, here’s a list of variables that could potentially detract from, or enhance, your practice’s earnings.
- The estimates above assume that one will be able to maintain a caseload of 35 client sessions per week. Low new client volume, or high client attrition, can reduce one’s weekly session count.
- To expedite the building of a caseload, more money could be invested into advertising (or time spent in professional networking, which could detract from your available client hours).
- Client cancellations and/or client no-shows could lower income, depending on how one manages their practice schedule.
- The estimates above do not account for unpaid session fees (subtract up to 4 percent).
- If you accept credit cards, subtract 2-3 percent revenue from whatever percentage of session fees you expect to process with plastic.
- The “net” above doesn’t include the cost of health insurance, retirement planning, or taxes, which are often partially covered by an employer. While not truly a cost of business, these items will detract from your expendable income.
- After building a strong reputation, and establishing active referral sources, you may be able to eliminate advertising and marketing (reclaim up to 5 percent).
- Owning a business might have legitimate tax advantages. For example, your mobile phone might qualify as a business expense (meaning it’s paid for with pre-tax money).
- If you see some (or all) cash-pay clients, you can reduce or eliminate medical billing expenses (reclaim up to 5.5 percent).
- If demand for your services outweighs supply (that’s you), you could raise your cash-pay rates to $99 (add $40,320 revenue).
- If you provide 40 sessions per week on average (that’s 30 face-to-face hours with clients), add $18,000 revenue.
- If you reduce your time off from 4 weeks to 3 weeks per year, add $2,625 revenue (not worth it!).